BT today welcomed the Competition and Markets Authority’s (CMA) decision to approve its acquisition of EE, unconditionally without remedies.

The CMA’s decision paves the way for BT to complete the acquisition of EE in the coming weeks and to incorporate the business into the wider BT Group in the months to come.

There will be a distinct EE line of business following completion of the acquisition. This will be led by Marc Allera who will become EE CEO following completion of the deal.

BT Chief Executive Gavin Patterson said: “It is great news that the CMA has approved our acquisition of EE. We are pleased they have found there to be no significant lessening of competition following an in-depth investigation lasting more than ten months.

“The combined BT and EE will be a digital champion for the UK, providing high levels of investment and driving innovation in a highly competitive market. I have no doubt that consumers, businesses and communities will benefit as we combine the power of fibre broadband with the convenience of leading edge mobile services. I look forward to welcoming EE into the BT family”.

Following today’s approval BT will commence the formal process of completing the deal. A prospectus will be issued in the week commencing January 25 with the deal set to close on January 29 when Deutsche Telekom and Orange will receive shares in BT. BT will report its Q3 2015/16 results on February 1.

Following completion of the deal Deutsche Telekom will have twelve per cent of BT shares and Orange will have four per cent. A representative of Deutsche Telekom will be appointed to the BT Board in due course.

About BT

BT’s purpose is to use the power of communications to make a better world. It is one of the world’s leading providers of communications services and solutions, serving customers in more than 170 countries. Its principal activities include the provision of networked IT services globally; local, national and international telecommunications services to its customers for use at home, at work and on the move; broadband, TV and internet products and services; and converged fixed/mobile products and services. BT consists principally of five customer-facing lines of business: BT Global Services, BT Business, BT Consumer, BT Wholesale and Openreach.

For the year ended 31 March 2015, BT Group’s reported revenue was £17,979m with reported profit before taxation of £2,645m.

British Telecommunications plc (BT) is a wholly-owned subsidiary of BT Group plc and encompasses virtually all businesses and assets of the BT Group. BT Group plc is listed on stock exchanges in London and New York.

BT’s proposed £12.5 billion takeover of EE received a boost from UK watchdog Ofcom after the regulator submitted a report to the Competition and Markets Authority (CMA) supporting the merger.
Ofcom, which does not have direct authority to approve the deal, advised the competition authority that concerns raised by rivals over the combined entities’ power did not merit intervention.

Within the 69 page submission, Ofcom further highlighted its own powers to deal with BT’s potential dominance, as it seeks to combine its broadband business with EE, UK’s largest mobile player.

“We believe the current and future proposed regulation that we apply to BT will limit BT’s ability to discriminate over price, quality and innovation in the provision of leased lines,” Ofcom said.

Mobile rivals in the UK have claimed they will struggle to meet capacity demands as a result of the deal, and there are further fears over the large share of mobile airwaves a combined BT and EE will have at their disposal.

Ofcom dismissed the concerns, stating “that even though the addition of BT’s spectrum may increase the peak speeds BT/EE could offer, on its own EE is already able to provide higher peak speeds than other MNOs”.

“For potential advantages in terms of WiFi hotspots, access to backhaul and opportunities for cross selling and bundling, we do not consider these are sufficient to create competition concerns.”

In the fixed space, rivals including Sky and TalkTalk claim the combined entity would be able to undercut its services, limit the market’s MVNO options and impact backhaul supply.

“We recognise that, as a vertically integrated firm, BT may have the incentive to discriminate in favour of its downstream divisions, and we impose regulation to address such concerns,” added Ofcom.

Ofcom said last month it was seeking views on whether BT and its Openreach networking division should be separated “to deliver competition or wider benefits to the end user”.

Hutch/O2
Ofcom also drew on Hutchison’s proposed merger with O2 within the report, which could prove to be a stumbling block

The proposed deal is set to be scrutinised by European regulators and Ofcom said “the importance of BT as an independent competitor could depend on the outcome of the proposed Hutchison, O2 merger”.

If Hutchison’s deal to acquire O2 goes through, It would serve to reduce the UK market to three players, adding weight to the argument to keep EE and BT separate, as BT already operates in the mobile space.